25th October 2014

This is despite URA data showing the fall in
private home prices moderating in Q3

Source: Business Times / Real Estate

WITH a
record number of new private homes being completed this year and the next, it
could be a while before prices and rents hit bottom, property consultants say(view
infographic).

More HDB flats entering the rental market could
further heat up the competition for tenants, they add. Such projections
dispelled any mild optimism that could have arisen from Friday's data from the
Urban Redevelopment Authority (URA), which showed the fall in private home
prices moderating. URA's overall private residential price index slipped 0.7
per cent in the third quarter - marking its most gentle decline since it turned
south a year ago - after a one per cent fall in the second quarter.

The main drag was a 1.8 per cent fall in landed homes,
while non-landed homes fell by a smaller 0.4 per cent quarter on quarter, with
the decline most pronounced in the Core Central Region (CCR) where prices fell
0.8 per cent.

DTZ
regional head of research Lee Lay Keng noted that prices in the city fringe and
suburban regions were supported by new launches in the third quarter, including
Highline Residences and City Gate located in the Rest of Central Region (RCR)
and Seventy Saint Patrick's in the Outside Central Region (OCR).

Yet, Ms Lee does not "expect prices to plateau
soon as the cooling measures coupled with the stricter financing conditions
will still keep transaction activity low".

Some 20,852 private condos and executive condos will
be completed in 2014, according to URA(view
infographic). Another 23,769 units are expected to be completed
next year.

A total of 13,575 private residential units were
completed in the first nine months of this year, already surpassing the 13,150
units for the whole of last year.

"This is already about 20 per cent higher than
the past five-year (2009-2013) annual average number of completions," Ms
Lee said, adding that more than 50 per cent of the completions in the third
quarter were located in the suburban areas.

JLL national research director Ong Teck Hui reckoned
that the record numbers of completions this year and the next two years are
expected to "intensify competition in the leasing market and exacerbate
the softening in rentals".

In the third quarter, private residential rents sank
by a deeper 0.8 per cent, after a 0.6 per cent decline in the preceding
quarter.

Developer sales in the third quarter fell a steep 42.6
per cent quarter on quarter to 1,531 units, in tandem with a 54.5 per cent fall
in new units launched. New sales accounted for 51.8 per cent of total sales in
the third quarter, down from 63.3 per cent in the second quarter.

Close to half of new sales took place in the suburban
region and some 43 per cent in the city fringe, URA data shows.

Still, the 738 units sold by developers in the OCR represent
the lowest since the fourth quarter of 2009, showing how hard cooling measures
have also hit the supposedly more resilient OCR segment, Mr Ong said.

By pulling back on new launches, developers managed to
move more units in existing launches, where the number of unsold units fell 7.4
per cent quarter on quarter to 5,845 units in the third quarter, after rising
for four straight quarters, Ms Lee observed.

After a total of 5,940 new sales in the first nine
months, consultants project full-year sales raked in by developers to be in the
region of 7,500-8,000 units - well below the 14,948 units sold last year.

Knight Frank research head Alice Tan pointed out that
there is a limit to how much developers can cut prices given the need to guard
margins, though they may dangle discounts for selected units from time to time.

A potential waiting fatigue could draw buyers back to
the market and "we foresee a bottoming out of prices at the end of Q1
2015", she said.

While stronger holding power among sellers has lent
support to private home prices, HDB resale flats dealt a bigger blow from
cooling measures and posted their steepest quarterly fall in prices since the
third quarter of 2005.

But the 1.7 per cent drop in HDB resale prices seemed
to have enticed more buyers, with resale transactions rising 2.8 per cent
during the quarter to 4,513 transactions.

Leasing activity for HDB flats also increased;
subletting transactions in the third quarter rose 5.5 per cent to 8,923 cases.

Consultants expect more HDB upgraders to put up their
HDB flats in the rental market as they move into their newly completed condo
units.

ERA Realty key executive officer Eugene Lim said he
expects resale volumes to fall to an all-time low of below 17,500 for 2014
before rebounding next year when the government scales down its build-to-order
(BTO) flats supply.

"As resale prices continue to stabilise, we may
see the return of more first-time buyers to the resale market, particularly
those that are unable or unwilling to wait the three years or so for the
completion of the BTO flats," Mr Lim said.

SLP International executive director Nicholas Mak
noted that with a reduction of new BTO flats next year, the fall in HDB resale
prices should moderate in the later part of 2015.

"However, as the government has not indicated any
plans to reduce the cooling measures, prices would still face downward pressure
in the next six to 12 months or until some property curbs are relaxed," he
said.

An earlier
version of this article incorrectly stated that HDB resale flats posted their
steepest quarterly fall in prices since the third quarter of 2001. It should be
the third quarter of 2005.

SINGAPORE — Prices of private homes in the Republic fell for a
fourth consecutive quarter between July and September, but the pace of decline
was more moderate, in what analysts said signals a market that is stabilising.

Still, they cautioned that the market has not made a complete
U-turn and prices could soften further in the coming months.

In the third quarter this year, overall prices of private
residential properties were down by 0.7 per cent, quicker than the 0.6 per cent
in the flash estimates three weeks ago but slower than the 1 per cent fall in
the March to June quarter, data by the Urban Redevelopment Authority (URA)
showed yesterday.

Property analysts said the softer fall was underpinned by several
“higher-priced” new launches, such as Highline Residences at Kim Tian Road,
City Gate at Beach Road and Bijou at Jalan Mat Jambol, where units at the
developments were sold at more than S$1,800 per square foot.

“There weren’t that many launches in (the third quarter), but the
prices of a few launches were on the higher side, so that gave some support to
the price index. The market is approaching a soft landing, but I don’t think
this is the bottom yet,” said Mr Nicholas Mak, executive director at SLP
International Property Consultants.

Condominium prices declined across all geographical segments, with
the city centre, or Core Central Region (CCR), recording the steepest fall of
0.8 per cent compared with 1.5 per cent previously. Prices in the city fringes,
or the Rest of Central Region (RCR), dipped 0.4 per cent, similar to the
previous quarter, while suburban or Outside Central Region (OCR) prices slipped
0.3 per cent from 0.9 per cent.

In the landed segment, prices were 1.8 per cent lower, compared
with the 1.7 per cent decrease in the previous quarter. In the third quarter,
developers launched 1,294 private homes and sold 1,531 units, both down from
the 2,843 units launched and 2,665 units sold in the second quarter. Resale
transactions also dropped to 1,288 sales from 1,389 transactions.

“Economic fundamentals are sound and we are not in any crisis
mode. As sellers are under no pressure to cut prices significantly, the
(market) continues to see a mismatch of expectations and deals take longer to
close,” said Mr Eugene Lim, key executive officer of ERA.

Knight Frank’s director of consultancy and research Alice Tan said
private home prices could see a slower decline in the last three months of the
year, as developers are less likely to moderate prices further as they try to
maintain profit margin and manage development cost.

Mr Mak agreed, adding that as several sites sold under the
Government Land Sales programme in the second half of this year are in better
locations, the launches would be able to hold their prices, thus limiting the
softening of the URA index.

“(But) I expect the price decline to continue for another year
because there’s still a lot of supply in the pipeline and demand is still
restricted by the cooling measures and financing curbs,” he said.

The URA said that as at the end of the third quarter, there were
74,496 uncompleted private homes in the pipeline, with 28,120 of them unsold.

Buyers
snap up HDB resale flats even as transactions in private sector dive

Source: Straits Times / Top of The News

FURTHER
price falls for homes in the third quarter sparked contrasting reactions in the
private and public housing market, spurring buyers back into the HDB market but
sending transactions in the condominium segment to rock bottom.

Values of
HDB resale flats fell by 1.7 per cent in the three months to Sept 30 compared
with the second quarter, according to Urban Redevelopment Authority data
yesterday.

Prices have
now fallen for five straight quarters, shedding 7.1 per cent in the process.

Buyers were
quick to notice, snapping up 4,513 resale flats in the period, up from 4,389
sold in the previous three months.

Reactions
from buyers in the private sector could not have been more different.

Prices fell
just 0.7 per cent in the quarter for new and resale homes but transactions
dived.

Only 1,531
new condo units found buyers - a low not seen since the 2008 financial crisis.
This was also well down from the 2,665 condominium units sold in the second
quarter.

Analysts
blame the sagging volumes for private homes on the mismatched expectations of
buyers and sellers as well as fewer launches.

The tale of
two markets is also likely to be a result of differing conditions.

The
fundamentals of the private property market have not given investors enough
incentive to leap back in, said Mr Alan Cheong, senior director of research and
consultancy at Savills Singapore.

"Investors
in the private home market are like a woman going on a shopping trip looking
for a bargain for the sake of it," he said. "Unless you're buying a
home to live in, prices have not come off to a level where investors think
there's value for money, even if they can afford it."

Levies on
foreign buyers and mortgage caps continued to bite, with prices down 3.9 per
cent over four straight quarters.

There may
have been some buyers defaulting on their mortgages for luxury homes but these
remain outliers for now, said Mr Cheong.

In
particular, values of non-landed homes - they account for most of the sales -
have fallen at an even milder pace of 0.4 per cent compared with the overall
price index, noted Mr Ong Teck Hui, national director of research and
consultancy at JLL.

Consultants
also said that a growing supply of new homes - an estimated 48,600 from this
quarter to the end of 2016 - is worrying investors, while vacancy rates, at 7.1
per cent, are the highest since the fourth quarter of 2006, based on available
data.

But HDB
buyers, in comparison, have "immediate housing needs" as they cannot
own more than one HDB flat or a private property at the same time.

First-time
buyers are giving up their place in the queue for a new flat to buy a resale
unit that they can move into almost immediately, said Mr Eugene Lim, key
executive officer of ERA Realty.

In addition
to falling resale prices, "buyers don't have to worry about paying high
cash premiums over and above valuations to buy a resale flat, unlike
before", added Mr Lim.

Resale
volumes of bigger units, such as four-room flats, picked up by 5 per cent to
2,999 units in the third quarter, partly because more upgraders sold their
homes to move into the increasing number of completed private homes, noted Mr
Nicholas Mak, research head at SLP International.

Barring an
external shock, analysts expect HDB resale prices to drop 6 per cent to 7 per
cent for the full year, while private home prices could fall by 4 per cent to 5
per cent.

The office segment has
emerged as the star of Singapore's property market in terms of prices and
rents, going by third-quarter data released by the Urban Redevelopment
Authority (view infographic). The ongoing office rent recovery story, fuelled
by tightness of available supply in the short term, has been supporting a
steady rise in prices of office space, noted market watchers.

But
consultants said the "exuberance" in rental growth could be fuelled
not by firms expanding, but by the tight supply of space.

Office
prices rose by 1.6 per cent in the third quarter, after staying flat in the
second quarter, while office rents rose 2.6 per cent for the quarter, having
previously added 2.8 per cent.

The office
rental index has been trending upwards since the first quarter of last year,
noted Mr Ong Teck Hui, JLL national research director. Over the quarter, office
supply fell by 506,000 sq ft to 79,739,000 sq ft amid a mix of change of use
and addition and alteration works. Two buildings that underwent such work were
the former NOL Building and Havelock II.

Office
supply fell across the island, but the Downtown Core saw the highest drop of
194,000 sq ft.

Islandwide
demand for office space rose by 538,000 sq ft to 73 million sq ft in the
quarter. As a result, islandwide occupancy rates were 91.6 per cent, its
highest level since the third quarter of 2008, said Ms Alice Tan, head of
consultancy and research at Knight Frank Singapore.

Occupiers
have made a "flight to quality" over the last few quarters, with
rents of Grade A office spaces, typically in the central region, moving faster
than rents elsewhere, said Mr Desmond Sim, head of research for CBRE Singapore
and South-east Asia.

This was
again true in the third quarter, as rents in the central area grew by 2.8 per
cent. Those on the city fringe rose 1.9 per cent.

But Mr Sim
said demand for office space by businesses has been modest, with limited demand
from financial institutions, traditionally the key driver of demand in this
market. Most demand is now from the business services sector, he said.

Consultants
pegged the annual growth of office rents this year to about 10 per cent. Some
downward pressure could come in 2016, with a large supply of about 5.4 million
sq ft of new office space coming onstream, said Mr Nicholas Mak, executive
director of SLP International.

In the
retail sector, islandwide occupancy levels slid for the third straight quarter
to 93.5 per cent. This is also the lowest level since the first quarter of
2011, said Ms Tan of Knight Frank. Retail prices fell 0.2 per cent for the
quarter after a 0.3 per cent fall in the second quarter, while rents rose
marginally by 0.1 per cent, following a 0.6 per cent rise previously.

Mr Ong Kah Seng,
director of R'ST Research, said that while average retail rents rose, it should
not be taken as an absolute gauge of whether retail rents are rising or
falling. "A typical retail lease has the variable of turnover rents (which
hinge on a tenant's sales volume)," he said.

The fall in
occupancy is largely due to retailers' thinning margins, given higher operating
costs, said Ms Tan.

Average
rents are expected to come under more pressure, if vacancies expand with no
further improvements in the retail sales index, said Mr Sim. "The latter
is likely as the strength of the Singapore dollar has been pushing consumer
spending away from the local market, and as online shopping takes off."

With a
further 9.5 million sq ft of retail space in the pipeline, retailers will be
presented with even more options over the next two to three quarters,
consultants said.

A joint venture between Low
Kheng Huat and Sun Venture owns the 20-level office tower, which has about
305,000 sq ft of net lettable area (NLA).

Nearby, offices at Jem are
about 80 per cent occupied. It has about 314,000 sq ft NLA.

"These early signs of
rising demand for office space in the Jurong regional centre is
encouraging," said Ms Alice Tan, head of consultancy and research at
Knight Frank Singapore.

"The area's growth will
be even more exciting when Big Box, Ng Teng Fong General Hospital, Jurong
Community Hospital and Genting Singapore's hotel are fully ready in the next
one to two years," she added.

Another project, Vision
Exchange, will add about 495,880 sq ft NLA of office space. The 740-unit mixed
development has launched about 378 units so far, with 72 per cent of them sold.

Median sale prices at Vision
Exchange are $2,280 psf for office units and $4,699 psf for retail units. Its
wide range of buyers include businessmen, doctors and investors, said a
spokesman from developer Sim Lian Group.

Buyer interest in Vision
Exchange's strata offices would be driven by plans to transform Jurong Lake
District, said Mr Ong Kah Seng, R'ST Research director. Buyers anticipate that
all properties - residential, retail and office - in Jurong East will benefit
and enjoy long-term capital appreciation, he said.

Leasing interest in offices
is likely to come from medical and hospitality-related firms, as well as
professional services firms, which tend to be cost conscious on rents, experts
said.

Rents in Jurong East are
about half those of prime grade spaces in the central business district (CBD),
which are about $11 to $13 psf per month, said Ms Tan.

However, said Mr Ong, demand
for decentralised office space is untested, so investors should not overpay for
strata offices in suburban locations.

"During economic
downturns, we see rents of offices in the CBD plummet... at such periods, there
is no incentive for companies to decentralise. Some may even move back to the
CBD as rents fall and more choices are available," he said, adding that
Japan and Hong Kong have faced such issues in decentralisation.

Retail-wise, Big Box,
Genting Singapore's hotel and Vision Exchange are expected to add about 341,324
sq ft of gross shop space by 2017. The area already has Westgate, JCube and
Jem.

The
1,715-unit development, which was launched for sale two years ago, still has
254 unsold units. So to move sales, its developer CapitaLand Singapore said it
will be refurbishing 30 units with additional designer furnishings.

Source: Channel News Asia / Singapore

SINGAPORE: Singapore's largest condominium project d'Leedon,
near Farrer Road, marked its completion on Saturday (Oct 25). But the
1,715-unit development, which was launched for sale two years ago, still has
254 unsold units - comprising mostly four-bedroom units - as of last month.

And to move sales, its developer CapitaLand Singapore said it
will be refurbishing 30 units with additional designer furnishings. Those units
will be re-launched next month.

Wong Heang Fine, CEO of CapitaLand Singapore Residential, said:
"The focus is really on buyers who do not want to have the hassle of doing
the interior decoration after they buy the units, they just want to move in. So
literally, all the 30 units are such that you can just bring your suitcase and
move in tomorrow after you purchased the units."

Last month, the developer gave 30 units at its The Interlace
condominium a makeover to attract buyers. CapitaLand said it is marketing the
units and a few have been sold. The 1,040-unit development was completed in September
2013 but still has about 170 unsold units as of August 2014.

Meanwhile, a party celebrating d'Leedon's completion was held
for residents on Saturday evening. Its developer went all-out to make an
impression.

It got America's Got Talent’s William Close to play a harp which
stretched from the project's clubhouse rooftop to another tower at the other
end. The harp is the world-longest playable stringed musical instrument - the
length of one of its strings measures 291.71 metres.

ASPIAL Corp
unit World Class Land is showcasing its upcoming Melbourne project at a public
preview in Singapore today.

The
commercial and residential tower, named Australia 108, was initially planned to
have 108 storeys but had to be lowered to 100 to accommodate flight paths,
Aspial said in a statement yesterday.

When
completed in 2019, the freehold project will be Melbourne's tallest building,
at 319m.

The tower is
in the Southbank district, near Crown Casino, Melbourne Exhibition Centre, the
arts precinct, the Royal Botanic Gardens and Queen Victoria Park.

The homes in
the tower are split into Sky Rise Residences, which are smaller units housed
between levels 11 and 67, and Cloud Residences, which are bigger apartments on
levels 72 to 97.

Altogether,
there will be 1,105 units ranging from studio apartments to a 8,772 sq ft
"super-penthouse" on the 100th floor.

The
condominium will feature facilities such as a 25m lap pool, a gym, theatrette,
steam rooms and saunas.

Aspial did
not reveal prices yesterday but said indicative prices will be available at the
preview, which is being held at the atrium of Keypoint at 371, Beach Road.

"Australia
108 will be the tallest building World Class Land has ever built and we are
exceptionally proud for it to also be the tallest residence in the Southern
Hemisphere," said Mr Koh Wee Seng, the director of World Class Land.

LOCAL real
estate investment trusts (Reits) have generally held on to the gains made over
the past nine months, despite wild share market swings in recent weeks, said
SGX My Gateway.

The
Singapore Exchange education portal found that some trusts have posted
resilient results, thanks to upgrading work, better occupancy rates and higher
rents.

And with low
interest rates likely to continue, funding costs for Reits looking to refinance
debt or acquire new assets should stay affordable.

Reits are
popular among investors as they can offer higher yields than regular property
stocks through tax-exempt dividends and a requirement to distribute at least 90
per cent of taxable net income to unitholders.

The 27 Reits
listed here have a total market capitalisation of $56.1 billion and have
averaged a year-to-date total return gain of 9.9 per cent while indicative
dividend yields averaged 5.8 per cent, said SGX My Gateway.

The FTSE ST
Reits Index, which tracks 33 local trusts, has had total returns of 12.39 per
cent this year, outpacing the Straits Times Index's 4.58 per cent gain.

"Investors
should consider the gearing levels of Reits, or how leveraged they are. If
interest rates suddenly go up, will they have to raise capital to satisfy bank
loans and will they be able to sustain their dividend payouts?" asked
remisier Alvin Yong.

The top
performers this year include CapitaRetail China Trust, which has 10 malls in
eastern China, Mapletree Commercial Trust, Suntec Reit, First Reit and
Mapletree Logistics Trust, said Gateway.

Suntec
Reit's distribution per unit (DPU) for the third quarter ended Sept 30 was up
from 2.289 cents a year ago to 2.328 cents, while distributable income jumped
12.4 per cent, from $51.8 million to $58.3 million.

Higher rents
and revenue contribution from completed projects boosted Mapletree Industrial
Trust (MIT), which announced a 4.1 per cent rise in second-quarter net property
income to $56.2 million yesterday.

DPU grew 5.3
per cent year-on-year to 2.6 cents for the quarter, while gross revenue rose
6.2 per cent to $77.9 million. Net property income for the first half rose 6
per cent to $112.9 million on the back of a revenue rise of 5.3 per cent year
on year to $156.3 million.

DBS Group
Research maintained a buy call on MIT, calling its dividend yield of 7.1 per
cent to 7.2 per cent "an attractive level, given its strong credit backing
and quality name".

"Planned
(upgrades) at Toa Payoh and development projects are expected to augment
longterm earnings growth and improved portfolio quality," it said.

"Current
gearing is conservative at 32 per cent, implying that the manager has the
capability to take on debt-funded acquisitions when the opportunity
arises."

Even though
Mapletree Logistics Trust's second-quarter earnings were in line with
expectations, OCBC kept a hold call, citing a challenging near-term outlook.

"Although
MLT achieved positive average rental reversions of 9 per cent for leases
renewed in the second quarter of 2015, the outlook remains muted," it
said.

The trust
recorded a 3.3 per cent rise in DPU to 1.88 cents, on the back of a 4 per cent
increase in the amount distributable to unitholders to $46.3 million.

Its portfolio committed occupancy rate is at
99.4%, above the market occupancy rate of 96.6%

Source: Business Times / Companies & Markets

Capitacommercial
Trust's (CCT) distribution per unit (DPU) for the third quarter rose 2.9 per
cent, from 2.04 to 2.10 Singapore cents, on the back of a 4.8 per cent jump in
distributable income, from S$58.8 million to S$61.6 million. This was computed
on the assumption that none of the outstanding convertible bonds due 2015 or
2017 were converted into CCT units.

Distributable
income hit $61.6 million, up 4.8 per cent over the $58.8 million posted in the
same period last year, said CapitaCommercial Trust Management, which manages
the office landlord.

Distribution
per unit (DPU) for the three months to Sept 30 came in at 2.1 cents, up 2.9 per
cent on the 2.04 cents last year. Based on its closing price per unit of $1.625
on Thursday, CCT's distribution yield is 5.2 per cent.

The increase
in distributable income was largely due to "strong performance" in
CCT's gross revenue and net property income, said the manager.

Gross
revenue for the quarter rose 8.4 per cent to $66.4 million, while net property
income increased 8.6 per cent to $51.9 million.

Ms Lynette
Leong, chief executive of the manager, noted that CCT's portfolio had a
committed occupancy rate of 99.4 per cent in the third quarter, higher than the
market occupancy rate of 96.6 per cent.

"Even
with the high occupancy rate, we signed new leases and renewals of
approximately 131,000 sq ft, of which 17 per cent are new leases," she
said.

Ms Leong
added that during the quarter, CCT secured higher rents for Grade A office
leases compared with those due for expiry.

This pushed
up the monthly average office rent of its portfolio by 4.9 per cent over the
past 12 months to $8.42 per sq ft (psf).

DPU rose 4.5
per cent to 6.32 cents for the nine months to Sept 30.

Gross
revenue increased 4.9 per cent to $196.2 million, while net property income was
up 4.5 per cent at $154.6 million.

Ms Leong
also said that CCT has secured leases for an additional 114,500 sq ft of space
at CapitaGreen, bringing the aggregate leasing commitment to 279,500 sq ft, or
40 per cent of the building's net lettable area.

"We are
in advanced stages of negotiation for another 75,000 sq ft of space, positioning
us well to achieve our 50 per cent target leasing commitment by the end of the
year," she added.

Earnings per
unit for the quarter was 1.97 cents, up from the 1.84 cents a year ago.

Net asset
value per unit stood at $1.69 as at Sept 30, down from the $1.71 as at Dec 31.

Mapletree Commercial
Trust on Friday reported a 9.4 per cent increase in distribution per unit (DPU)
to 1.97 Singapore cents for its second quarter ended Sept 30, 2014. This came
on the back of an 11 per cent increase in income available for distribution to
S$41.4 million.

THE VivoCity
shopping mall at HarbourFront will get part of its basement renovated later
this year for about $5.5 million.

Its owner,
Mapletree Commercial Trust (MCT), told the Singapore Exchange that it plans to
create about 15,000 sq ft of new retail space at VivoCity's Basement 1 level.

The new
space will allow the mall to capitalise on strong foot traffic from the direct
link to the HarbourFront MRT station and bring in new brands, the trust said in
a statement.

The
announcement came as it posted a 9.4 per cent jump in distribution per unit
(DPU) to 1.97 cents for its second quarter from the previous year.

Income
available for distribution climbed 11 per cent to $41.4 million from the
previous year.

Net property
income for the three months to Sept 30 rose 8.8 per cent to $52.1 million on
the back of a 6.3 per cent increase in gross revenue to $70 million from a year
ago.

MCT said
that the majority of the leases in VivoCity that are due to expire by March 31
next year, its financial year-end, have been renewed or re-let.

"While
the market conditions have presented challenges for retailers and F&B (food
and beverage) operators in general over the past few quarters, VivoCity is
still well-received by shoppers and well-supported by our tenants," said
Ms Amy Ng, chief executive of the trust manager, in a statement.

For the new
retail space being planned, the trust said it would convert carpark, ancillary
and some "lower-yielding" space into prime retail space.

The renovation
work is expected to start in the final three months of this year and be
completed by the end of September next year.

The trust
said that leases for the majority of the new space were "being
finalised" but did not elaborate on which retailers it would be bringing
in.

Besides
VivoCity, the real estate investment trust also owns Bank of America Merrill
Lynch HarbourFront, PSA Building and Mapletree Anson. The trust said that
Mapletree Anson managed to get occupancy back up to 100 per cent in the quarter
ended Sept 30.

MCT units
rose one cent to $1.46 yesterday before the results were released.

Capitaretail China
Trust (CRCT) on Friday posted a 10.3 per cent increase in its distribution per
unit (DPU) to 2.35 Singapore cents for its third quarter ended Sept 30, 2014.
Income available for distribution rose 14.1 per cent to S$19.5 million. Gross revenue
rose 30.2 per cent to S$51.4 million, or 32.3 per cent to 253.7 million yuan.
The difference in currency terms was due to a weaker yuan against the Singapore
dollar. Net property income went up 29.2 per cent to S$32.3 million.

THE strong
economy in China during the third quarter bolstered earnings at CapitaRetail
China Trust (CRCT) and Mapletree Greater China Commercial Trust (MGCCT).

CRCT's
distributable income rose 14.1 per cent to $19.5 million for the three months
ended Sept 30, which brought its distribution per unit (DPU) to 2.35 cents, up
10.3 per cent from levels in the corresponding period a year ago.

The
annualised distribution yield for the period came in at 5.9 per cent, based on
an annualised DPU of 9.32 cents and CRCT's closing price of $1.59 per unit
yesterday.

Contributions
from CapitaMall Grand Canyon, a Beijing mall acquired at the end of last year,
boosted gross revenue for the real estate investment trust (Reit) to $51.4
million, up 30.2 per cent from levels a year earlier.

Occupancy
across the Reit's portfolio of 10 malls in six cities reached 97.6 per cent.

Rental
reversions at multi-tenanted malls came to 22.6 per cent, while tenant sales
grew 16.1 per cent and shopper traffic 3.8 per cent.

The chairman
of the Reit's manager, Mr Victor Liew, said: "Despite headwinds, China's
economy has maintained its momentum because of growth-enhancing stimulus
measures, and we can expect more of such measures as the government works
towards achieving sustainable growth."

China's
economy expanded at a better-than-expected 7.3 per cent in the third quarter,
beating consensus estimates of 7.2 per cent, although the pace was the slowest
seen in five years.

Even so,
retail sales in the country jumped 12 per cent to 18.9 trillion yuan (S$3.9
trillion) during the first nine months of the year.

In the
meantime, MGCCT says that as China's economic growth stabilises, it will
benefit from continued demand in the Beijing Grade A office property market.

The Reit has
two properties: Gateway Plaza, an office building with a retail podium in
Beijing, and Festival Walk, a mall with an office component in Hong Kong.

High
occupancy rates and healthy rentals in both Beijing and Hong Kong led to a 11.9
per cent rise in MGCCT's distributable income to $43.5 million for its second
quarter ended Sept 30.

Its DPU increased
10.4 per cent to 1.606 cents, which represented a yield of 6.7 per cent based
on an annualised DPU of 6.371 cents and yesterday's closing price of 95 cents
per unit.

Gross
revenue rose 6.9 per cent to $67.5 million, while net property income grew 9
per cent to $55.1 million.

Ms Cindy
Chow, the chief executive of the Reit's manager, said in a statement:
"This good set of results is attributed to healthy rental reversions from
Festival Walk and Gateway Plaza, as well as proactive asset management and
efficient cost management by the team."

Festival
Walk enjoyed 100 per cent occupancy for both its retail and office space, while
Gateway Plaza secured an occupancy rate of 98.6 per cent.

Both assets
saw high rental reversions from the renewal of leases that boosted earnings -
Festival Walk's rental uplift came in at 21 per cent while Gateway Plaza's was
32 per cent.

The trust
said Festival Walk has not been adversely affected by the ongoing protests in
Hong Kong, because the mall is in the Kowloon Tong area, away from the
demonstrations, which are taking place mainly in Central and Mongkok.

Unitholders
will receive a DPU of 3.162 cents for the half-year on Nov 24.

CRCT units
rose 2.5 cents to close at $1.59 yesterday, while MGCCT units ended up half a
cent at 95 cents. Both Reits reported earnings after markets closed.

Mapletree Greater
China Commercial Trust has posted an 11.9 per cent increase in distributable
income for its fiscal second quarter on the back of higher rentals. The real
estate investment trust's income available for distribution to unitholders rose
to S$43.5 million for the three months ended Sept 30. The Reit will distribute
1.606 Singapore cents per unit, up 10.4 per cent from its year-ago
distribution.

Ascott Residence Trust
(ART) announced the acquisition of three operating serviced residences in
Greater Sydney. The A$83 million (S$93 million) consideration represents a 2
per cent discount to independent valuation. The properties are operated under
the Quest brand, which is Australia's largest serviced apartment provider with
112 properties and primarily services domestic corporate clients.

Frasers Centrepoint
Trust (FCT) posted a 17.5 per cent increase in income available for
distribution for its fiscal fourth quarter as it reaped contributions from the
newly acquired Changi City Point mall. The retail real estate investment trust
(Reit) said income available for distribution rose to S$25.5 million over the
three months to Sept 30, in line with its own forecast. All of that will be
paid out to unitholders. The per-unit distribution of 2.785 Singapore cents, of
which 2.711 cents is taxable and 0.074 cent is exempt, represents a 6.5 per
cent decrease from the year-ago payout of 2.98 cents.

FRASERS
Centrepoint Trust's (FCT) latest results received a boost from the recently
acquired Changi City Point and better rental rates for new and renewed leases.

Net property
income at the trust, which owns several malls across Singapore, jumped 14.9 per
cent to $31.34 million for the fourth quarter. Gross revenue rose 16.1 per cent
year on year to $46.68 million for the three months ended Sept 30.

Distribution
per unit (DPU) for the quarter was 2.785 cents - a 6.5 per cent fall as the DPU
for the corresponding quarter last year included retained cash from earlier
quarters.

For the full
year, net property income rose 5.8 per cent year on year to $118.1 million,
while gross revenue rose 6.8 per cent to $168.75 million.

FCT also
holds 31.17 per cent of units in Hektar Real Estate Investment Trust (Reit), a
retail-focused Reit in Malaysia.

Overall
portfolio occupancy was 98.9 per cent as at Sept 30, higher than the 98.5 per
cent occupancy as at June 30.

During the
quarter, 46 leases accounting for 53,484 sq ft, or 4.9 per cent of FCT's total
net lettable area, were renewed, at an average rental 10.9 per cent higher than
the preceding leases which had been typically contracted three years ago.

Earnings per
unit for the three months ended Sept 30 was 10.34 cents, down from 26.23 cents
for the same period last year. Net asset value per unit was $1.85 at Sept 30,
up from $1.77 a year back. FCT's units closed three cents higher at $1.94
yesterday.

Frasers Commercial
Trust (FCOT) posted Q4 2014 revenue of S$32 million, up 10 per cent
year-on-year, and distributable income of S$15 million, up 9 per cent, driven
by better-than-expected reversionary income from Alexandra Technopark (ATP)
post-expiry of the master lease, as well as higher rents and occupancies at
China Square Central. This was mitigated by lower contribution from the
Australian properties on the back of the weaker AUD.

THE
anniversary posters are lining the streets and commemorative activities are set
to be rolled out to mark the 20th year of the Sino-Singapore Suzhou Industrial
Park (SIP) later this month.

But the
celebratory mood has been dampened by recent news that two Chinese officials of
the flagship bilateral project's joint venture firm might have engaged in
corrupt activities.

Graft
investigations were launched last month against Mr Du Jianhua and Mr Bai
Guizhi, former chairman and former chief executive of China-Singapore Suzhou
Industrial Park Development Group (CSSD), respectively.

The probes
have sparked worry among some people, including Mr Ray Kung, CEO of GCoreLab.
The Singapore firm set up shop in the SIP recently to produce electric buses,
and Mr Kung fears the probes might slow his firm's growth, particularly with
the loss of Mr Du, who was "one of the potential lobby officials for
electric vehicles".

For now,
observers believe the probes should have little impact on the SIP and the CSSD,
pointing out that Mr Bai was with the company for only three months and Mr Du
was not involved in its daily running in his chairman role.

Still, the
two cases show the selection of officials for top jobs can be improved - a
point that Mr Yang Zhiping, head of the SIP Administrative Committee, made in a
recent interview.

Anti-graft
work will be one of several challenges the SIP has to tackle as it celebrates
its success in commemorative activities attended by Singapore Deputy Prime
Minister Teo Chee Hean and Chinese Vice-Premier Zhang Gaoli. They will also
chair meetings of the Joint Council for Bilateral Cooperation and Joint
Steering Councils for SIP and Tianjin Eco-city on Monday.

What else
does the SIP need to do to maintain its edge and relevance to China and
Singapore amid changing economic needs?

Chequered
past

THE SIP was
launched in 1994 as the first government-to-government project for Singapore to
share industrialisation expertise with China.

A 288 sq km
area, about a third of Singapore's size, was designated in eastern Suzhou, of
which 80 sq km belonged to the China-Singapore cooperation zone. Singapore held
a 65 per cent stake in the CSSD, and China the rest.

Mr Khor Poh
Hwa, CSSD's deputy CEO overseeing infrastructure from 1996 to 1997, said
"we had to introduce our Singapore way of open tender, transparent tender
evaluation and approval system and adapt them for SIP".

But the SIP
struggled to attract investments and had losses of US$77 million in its first
seven years. A key reason was a rival park - Suzhou New District - that the
local government was pushing to foreign investors.

Several
factors led to the SIP's turnaround from 2001 and it has not looked back since.
One was Singapore cutting its stake to 35 per cent to incentivise the local
government to support the SIP. Its stake now is 28 per cent. Another was
greater support by the Chinese government from 2001.

Tackling
new challenges

PROFESSOR
Ren Hao, dean of Tongji University's Development Research Institute, said many
industrial parks are emulating the SIP in building good infrastructure and
better meeting the needs of enterprises and residents.

He cited
several challenges for the SIP to become the "2.0 version of industrial
parks". One area is building up public institutions to deliver quality
services to enterprises and residents.

"The
SIP needs to create better synergy between industries for them to work together
and not individually," he added, citing the need to create eco-systems for
companies with upstream and downstream vendor supply.

The
challenge, it seems, lies in striking a good balance.

Space
constraints and rising labour costs have prompted the SIP to move
labour-intensive industries out and attract high-tech industries such as
bio-medicineand service industries like logistics, said Mr Yang.

But Mr Jin
Zhifeng, 42, chairman of SJEC Corp that makes lifts and escalators and moved
into the SIP in 1998, said there should be an eco-system of large firms and
small vendors. Otherwise, transport costs could rise if small firms cannot
enter or have to move out.

Some cited
the need to further streamline the SIP's bureaucracy.

Ms Rong Zi,
65, who has three clinics in the SIP, notes how she has to submit 87 different
forms to get a foreign doctor permit. "This surely can be improved."

Keeping
the Singapore DNA

AS IT
changes to cope with new challenges, many say the most crucial factor for the
SIP is to maintain its Singapore DNA, including traits like administrative
efficiency, good infrastructure and a focus on talent - all the key factors
that helped the SIP succeed in attracting and keeping firms.

Mr Mathia
Nalappan, vice-president for global business at Singapore IT firm NCS, praised
the SIP for its talent-recruitment drives in universities across China. Taking
part in these drives helped NCS grow its SIP staff from 20 in 1998 to over 900,
he added.

Mr Tan Tze
Shang, regional general manager for Greater China at The Ascott Limited, which
has three properties in SIP, believes the park owes its success largely to
"an efficient and capable" management that provides good quality
service.

Assistant
CEO Yew Sung Pei of International Enterprise (IE) Singapore said the SIP has to
maintain its "mature and sophisticated operating environment", useful
in test-bedding new technologies and innovative ideas and in piloting China's
reform policies.

Overall,
there is optimism over the SIP's continued relevance to China and Singapore.

Prof Ren
said the SIP is a useful model as China builds industrial parks in countries
like India.

The SIP's
usefulness has also risen in China's new urbanisation push that focuses more on
meeting the needs of the people and enterprises instead of blindly building new
cities in the hope that people would come, said CSSD chairman Zhao Zhisong.
"The SIP is a good example of the new-type urbanisation model - with our
emphasis on urban planning and meeting the people's needs."

Goal: The second Sino-Singapore
government-to-government project aims to develop an environment friendly city
as a model of sustainable development. Begun in 2008, an 8 sq km start-up area
of the 30 sq km zone was completed in 2013.

Current status: 15,000 residents
and around 1,300 firms have moved in.

Key challenges: Development was
hampered by delays in the building of transport links. Construction of two
semi-express rail lines linking it to the rest Tianjin will begin at year-end.

GUANGZHOU KNOWLEDGE CITY

Goal: The first bilateral project led
by the private sector aims to attract knowledge-intensive, high-tech
industries. Building of the 123 sq km zone began in 2010, with the start-up
area of roughly 8 sq km to be completed in 2017.

Current status: The resettlement
of local residents and construction of basic infrastructure, a centrepiece lake
and lakeside park have been completed.

Key challenges: The 2008-2009
financial crisis delayed the progress of the GKC as private investment slowed
for a few years.

JILIN FOOD ZONE

Goal: The private sector-led project
aims to provide Singaporeans with secure food supplies and apply Singapore
food-hygiene standards to Chinese manufacturers. Building of the 1,450 sq km
food zone began in 2012.

"BUILD as we plan" is how it is done in most of China's
industrial parks and what Anhui official Wu Bin did too when he headed the
Langya Economic Development Zone in Chuzhou city.

But the lack of urban planning led to wastage of public resources,
such as a newly built, 30 million yuan (S$6.2 million) road junction that had
to be removed to make way for a multi-billionyuan automotive plant.

Now, after working in the Suzhou-Chuzhou Modern Industrial Park
(SCP) since 2012, Mr Wu sees the importance of urban planning through his role
as the project's deputy head overseeing infrastructure development.

The SCP - a joint project of the SinoSingapore Suzhou Industrial
Park's (SIP) venture firm and the Chuzhou government - has spent 30 million
yuan on 22 urban planning studies on areas such as roads, electricity
generation and recreation zones, he said.

"I now have a new understanding of how things should be
done," said the Chuzhou native.

Mr Wu's change shows how the SIP is fulfilling its long-term goal
of sharing Singapore's industrialisation expertise and "software"
across China.

SIP's joint venture firm, China-Singapore Suzhou Industrial Park
Development Group (CSSD), began doing so with two projects in Jiangsu province:
Suqian-Suzhou Industrial Park in 2007 and Suzhou-Nantong Science and Technology
Park in 2009.

The SCP, which broke ground in April 2012, is the CSSD's first
venture outside Jiangsu, and key traits of the SIP could be seen in the 36 sq
km park when The Straits Times visited recently.

For instance, it is near Chuzhou city's old district, just like
how the SIP is next to Suzhou city's old town.

Mr Tang Yanzhe, president of the CSSD subsidiary that holds a 56
per cent stake in the SCP, said proximity is important in ensuring a readily
available pool of workers and residents.

This makes it appealing to enterprises setting up factories or
property projects.

So far, the SCP, which has attracted 38 firms investing 1.7
billion yuan, has received rave reviews. Many investors cite its Singapore link
and the SIP reputation as reasons for moving there.

Mr Yang Bin, factory director for Chuzhou Jinfu Credit and
Technology, which makes optical display films among other things, said it did
not look further than the SCP as it had been operating in the SIP since 2003
and was happy with the "Singapore-style" pro-business treatment
there.

The SCP's geographical advantage is a key factor. It is linked by
high-speed rail to Beijing, four hours away, and Shanghai, 90 minutes away.

The CSSD plans to explore more opportunities like the SCP, said Mr
Tang. "Also, we have the expertise to meet a need in the market," he
added.

Purchases of new houses in the U.S. rose in September, and revisions showed the magnitude of the unfolding recovery was more modest.

Sales (NHSLTOT) increased 0.2 percent to a 467,000 annualized pace, in line with the median forecast of economists surveyed by Bloomberg, Commerce Department data showed today in Washington. The August rate of 466,000 was 7.5 percent weaker than previously estimated, and data for the prior two months also were revised down.

Home sales are struggling to accelerate as Americans find mortgages difficult to obtain and wage gains barely keep pace with inflation. The recent drop in borrowing costs will probably help prop up the residential real estate market heading into 2015, which will give the world’s largest economy a lift.

“This was going to be a very lengthy recovery for the housing sector, and we still have a long way to go,” said Scott Brown, chief economist at Raymond James & Associates Inc. in St. Petersburg,Florida, the second-most accurate new-home sales forecaster over the past two years, according to data compiled by Bloomberg. “The low mortgage rates are very helpful. The job growth is very, very helpful. But we’re still seeing relatively tight mortgage credit and relatively weak growth in average wages.”

Stocks rose, with the Standard & Poor’s 500 Index capping its best week since 2013, as companies from Procter & Gamble Co. to Microsoft Corp. climbed after reporting earnings. The S&P 500 advanced 0.7 percent to 1,964.58 at the close in New York. The S&P Supercomposite Homebuilding Index increased 0.3 percent.

U.K. Economy

Reports overseas today showed U.K. economic growth cooled in the third quarter as threats to the recovery from the euro-area slump mounted. Gross domestic product rose 0.7 percent in the three months through September, compared with 0.9 percent in the second quarter, the Office for National Statistics said.

The median forecast of 75 economists surveyed by Bloomberg called for the pace of U.S. new-home sales to decelerate to 470,000 in September from the previously reported 504,000 rate the prior month. Estimates in the Bloomberg survey ranged from 433,000 to 513,000.

The rate of purchases last month represented a new six-year high only because of the big August revision.

As the August markdown attests, the preliminary figures can be subject to large revisions. What can be said is that the final reading for September home sales will show somewhere between a 15.5 percent drop and a 15.9 percent gain, according to today’s Commerce Department report.

Earlier this year, figures for May were revised down by 12.3 percent the subsequent month.

Revisions’ Impact

“Taking the revisions into account, we cannot now say with any conviction that sales have broken definitively above the 400-to-460K trend in place since late 2012,” Ian Shepherdson, chief economist at Pantheon Macroeconomics Inc. in White Plains, New York, said in a research note.

The median sales price of a new house dropped 4 percent last month from September 2013 to $259,000, today’s report showed. That was the first decrease since April and the largest since January 2012.

Regionally, demand improved in the South and Midwest, was little changed in the Northeast and dropped in the West.

The supply of homes at the current sales pace was little changed at 5.3 months in September. There were 207,000 new houses on the market at the end of the month, the most since July 2010.

Mortgage Rates

Declining borrowing costs will help make big-ticket purchases such as homes more affordable. The average rate on a 30-year, fixed mortgage fell to 3.92 percent in the week ended Oct. 23, the lowest since June 2013, according to Freddie Mac data. The rate has dropped by 0.27 percentage point over the past three weeks as concern over slowing global growth pushed investors out of stocks and into the safety of Treasury securities, causing yields to drop on the benchmarks used to calculate home-lending costs.

New-home sales, which account for about 7 percent of the residential market, are tabulated when contracts are signed, making them a timelier barometer than existing homes.

Purchases of previously owned homes, which are counted when a contract closes, climbed in September to the highest level in a year, National Association of Realtors data showed earlier this week. The 2.4 percent gain pushed sales to a 5.17 million annualized rate.

At the same time, the existing-home sales figures showed that participation among first-time buyers is still languishing. Those consumers made up 29 percent of the market for a third month in September, below the historical average around 40 percent.

Rental Construction

Builders are staying busy by focusing on rental housing. Work began on more homes in September with a gain in multifamily projects such as apartment buildings outpacing single-family properties, Commerce Department data showed last week. Permits to build also rose.

“The housing market has entered a period of more modest growth than we experienced in 2012 and 2013,” Larry Seay, chief financial officer at Meritage Homes Corp., a Scottsville, Arizona-based builder, said at an Oct. 1 finance conference. “But we believe it is still in the early innings of recovery and has a potential to grow for many years.”

While household formation has been “running well below normal levels,” the U.S. population has grown and employment is picking up, he said.

“More people than ever, with more jobs than ever, represents a tremendous amount of potential demand for new housing since vacancy rates are very low today,” Seay said.

Payroll gains are on pace for their best performance in 15 years. Through September, the economy has added an average 226,670 jobs per month after a 194,250 average last year.

Clem Ziroli Jr.’s mortgage firm, which has seen its costs soar to comply with new regulations, used to make about three loans a day. This year Ziroli said he’s lucky if one gets done.

His First Mortgage Corp., which mostly loans to borrowers with lower FICO credit scores and thick, complicated files, must devote triple the time to ensure paperwork conforms to rules created after the housing crash. To ease the burden, Ziroli hired three executives a few months ago to also focus on lending to safe borrowers with simpler applications.

“The biggest thing people are suffering from is the cost to manufacture a loan,” said Ziroli, president of the Ontario, California-based firm and a 22-year industry veteran. “If you have a high credit score, it’s easier. For deserving borrowers with lower scores, the cost for mistakes is prohibitive and is causing lenders to not want to make those loans.”

Federal regulations, enacted after the collapse of the subprime market spurred the financial crisis, are boosting mortgage costs this year. Most lenders are responding by providing home loans only to borrowers with near perfect credit, shutting out creditworthy Americans whose loan files are too expensive to review and complete. If banks commit compliance errors in issuing a loan that goes bad, they have to buy it back at a loss from Fannie Mae orFreddie Mac.

During the housing boom between 2004 and 2007, lenders provided about $2 trillion in subprime loans, many to unqualified borrowers. So-called liar loans didn’t require borrowers to provide pay stubs or tax returns to document earnings. Teaser rates as low as 1 percent offered on mortgages soared when they reset a few years later.

Subprime Mortgages

The share of subprime mortgages for which borrowers either provided little documentation of their assets or none at all rose to 38 percent in 2007 from 32 percent in 2003, according to a paper published by the Federal Reserve. Almost one in four of those mortgages defaulted by 2008 compared with one in five of fully documented subprime loans. Wall Street firms securitized pools of the loans called collateralized debt obligations and sold them to investors. They also created so-called synthetic CDOs that were derivative instruments designed to mirror the performance of the loan pools.

“What started the crisis were these loans that were designed to fail, loans that weren’t underwritten at all,” said Julia Gordon, director of housing finance and policy at the Washington-based Center for American Progress, which has ties to the Democratic Party. “No one quite realized that these loans were then at the bottom of this giant pyramid scheme, where the Wall Street derivative products that were based off of them would just come crashing down and take the whole economy with them.”

CFPB Rules

Federal rules put in place after the 2008 financial crisis attempt to prevent such reckless lending. The Consumer Financial Protection Bureau in January began implementing the qualified mortgage rule, a 52-page document mandating that lenders must take detailed steps to prove that borrowers have the ability to repay their mortgages. The measure also cracks down on risky loan features such as balloon payments and large fees by leaving lenders exposed to legal liability if they issue such loans.

“The industry as a whole did a terrible job of self-policing and they should not be shocked that there’s now more oversight than there was before,” Gordon said.

The CFPB has issued eight rules since 2011 governing everything from appraisals to compensation for loan officers. Six regulators including the Federal Reserve jointly issued a 553-page document this week containing instructions for when lenders must retain a stake in mortgages that they package for sale to investors. And the industry is now bracing for sweeping regulatory changes from the CFPB that take effect in August governing the mortgage estimates lenders give borrowers.

No Coordination

Bill Cosgrove, chief executive officer of Strongsville, Ohio-based Union Home Mortgage Corp., said the issue for lenders isn’t more regulation. In a speech earlier this week to attendees at the Mortgage Bankers Association annual conference in Las Vegas, Cosgrove said the several regulatory agencies are not coordinating efforts and are producing overlapping and conflicting rules.

“The regulatory avalanche of today’s Washington isn’t working and we are seeing the results in today’s marketplace,” he said. “Regulators who oversee the mortgage market aren’t coordinating, and it’s driving up the cost of homeownership. Or worse, taking homeownership out of reach for too many Americans.”

Lenders’ expenses to make a single loan averaged a total of $6,932 in the second quarter, a 35 percent jump from two years ago, when average volume was similar, according to the MBA. The cost reached $8,025 in the first quarter.

Lending Falls

The higher costs and concerns about buybacks are driving the decline in mortgages for home purchases. It will slow to $635 billion this year, a 13 percent drop from 2013, according to MBA estimates.

Banks have constrained home lending to many borrowers deemed creditworthy by mortgage finance companies Fannie Mae (FNMA) and Freddie Mac. Applicants approved for mortgages to purchase homes had an average FICO credit score of 755 in August, according to Ellie Mae, a company that makes software used to process mortgage applications. In contrast, Fannie Mae and Freddie Mac guidelines allow for credit scores as low as 620 for fixed-rate mortgages in some cases.

Lenders reported a 30 percent median increase in compliance costs this year from 2013, according to a survey by Fannie Mae released this month. And 72 percent of lenders surveyed said they spent more on compliance this year compared with last year.

Smaller Lenders

Banks are passing some of the costs of compliance to borrowers. Initial fees and charges paid by consumers on agency fixed-rate purchase loans have increased 10 percent to 1.21 percent as of August compared with a year earlier, according to survey data from the Federal Housing Finance Agency. The fees reached a high of 1.35 percent in February this year.

Smaller lenders may be hurt the most by compliance costs, said Guy Cecala, publisher of Inside Mortgage Finance, a trade publication. They have fewer resources to maintain records and train employees, which is essential to protecting lenders in the new regulatory environment, he said.

“There’s no question in this newer market it’s harder for smaller lenders to survive,” Cecala said.

These lenders, which have smaller balance sheets, generally can’t hold the loans on their books and have to sell them to government agencies or investors. At 1st Priority Mortgage, based outside of Buffalo, New York, one investor who buys the company’s loans requires employees to fill out a seven-page form verifying compliance with qualified mortgage standards. Other investors each require different forms, said 1st Priority’s President Brooke Anderson Tompkins.

Significant Increases

The costs of satisfying investors, on top of the reams of paperwork, intensified staff training and software upgrades to please regulators, are eating into the company’s margins at the same time that volumes are down, Anderson Tompkins said.

“Our costs have gone up significantly, because from our perspective, we don’t have a choice but to comply,” she said. “You miss one of those boxes” on the form “and you potentially have a loan that is not ever saleable.”

Some of the burden of the additional costs will eventually ease with familiarity and automation of processing, said Gordon of the Center for American Progress. The CFPB provides some relief for lenders with less than $2 billion in assets and fewer than 500 purchase originations or refinancings a year. The agency waives the 43 percent cap on the debt-to-income ratio that’s part of the qualified mortgage rule for larger banks.

More Examiners

Regulators are also reducing buyback risks to lenders. U.S. Housing and Urban Development Secretary Julian Castro, who oversees the Federal Housing Administration, pledged at the MBA conference to help give lenders more certainty about when they would face liability for defaults on loans. Federal Housing Finance Agency Director Melvin L. Watt also provided details on what will trigger penalties for lenders who sell loans to Fannie Mae and Freddie Mac. More specifics will be unveiled in the coming weeks.

The largest lenders won’t pull back substantially from the market even as costs rise because they want to maintain relationships with customers to cross-sell products, said Kevin Barker, an analyst at Compass Point Research & Trading LLC. They also get revenue from other business units to withstand the mortgage costs for longer than smaller lenders, Barker said.

Ziroli of First Mortgage said he hired several examiners to be another set of eyes and review non-credit related items in loan files, such as missing documents.

“All government agencies are insistent on this perfect file,” he said. “As you go down the FICO grid, there’s a higher probability of a mistake.”

BEIJING/HONG KONG - Chinese home prices fell for a fifth straight
month in September, wiping out gains scored in the past year and raising
expectations that the government will implement more economic support measures
to cushion the blow.

The monthly falls left average home prices in 70 major cities down
1.3 per cent in September from a year earlier, the first such drop since
November 2012. Prices of new homes fell month-on-month in a record 69 of the 70
cities, up from 68 in August. Only the southern city of Xiamen saw stable
prices last month, National Bureau of Statistics (NBS) data showed.

The worst performance was in the eastern city of Hangzhou, where
prices sagged 7.6 per cent in September from a year earlier.

The decelerating property market, which accounts for about 15 per
cent of China's economy, has crimped demand in 40 sectors ranging from steel to
cement and furniture.

"The property downturn is still the main drag on the
economy," UBS Hong Kong economist Wang Tao said. "The negative impact
of the ongoing property downturn is being felt not only in heavy industry but
also in manufacturing investment."

The slowdown followed GDP data showing the economy in the
September quarter grew at its slowest rate since the 2008/2009 financial
crisis, adding to worries that it will weigh on global growth.

Mr Yu Bin, a senior economist at the Development Research Centre,
the Cabinet's think-tank, said yesterday that it expected China's economy to
grow by 7.4 per cent this year, slightly below the government's target of 7.5
per cent. That would be the slowest pace in 24 years.

Chinese officials have indicated they are willing to tolerate
slightly slower growth as long as the job market holds up, so there was some
relief in the steady unemployment data issued yesterday.

China's urban registered unemployment rate was 4.07 per cent at
the end of September, down slightly from 4.08 per cent at the end of the second
quarter, the labour ministry said.

A government spokesman said the 10.82 million new jobs added so
far this year already exceeded the full-year target of 10 million, mainly due
to the strong services sector.

Late last month, China cut mortgage rates and down-payment levels
for some home buyers for the first time since the financial crisis, its boldest
step yet to energise an economy increasingly threatened by a sagging housing
market.

Although transaction data from private real estate agencies
pointed to a pick-up in sales in recent weeks, the impact of new government
measures to provide cheaper loans to second-home buyers remains uncertain.

"It still takes time to see whether a recovery of home sales
will affect home prices," senior NBS statistician Liu Jianwei said.

Analysts agreed it was too early to tell if government moves last
month to lower mortgage rates and down-payment requirements would be enough to
stem the price slide. And even if prices do stabilise, developers will remain
reluctant to start new projects until a glut of unsold homes is worked off,
depressing demand for raw materials.

Meanwhile, Chinese developers are turning to marketing gimmicks as
they battle to shift their massive inventory, including resort stays for
buyers.

UBS AG (UBS), the Swiss bank that’s been cutting jobs, is considering whether to move out of its office complex in Stamford, Connecticut, according to a person with knowledge of the plans.

The bank is examining its options for the campus close to Stamford’s train station, where it has a lease that runs through 2017, said the person, who asked not to be named because the discussions are private.

At the same time, the landlord of the Zurich-based bank’s three buildings in Stamford has hired Cushman & Wakefield to explore leasing alternatives for the property, said Jay Hruska, a vice chairman in the brokerage’s Stamford office. The 725,000-square-foot (67,000-square-meter) complex, owned by AVG Stamford Members LLC, has a trading floor that is one of the largest in the world, about the size of two football fields.

UBS has been evaluating what to do with its Stamford offices for several years. In 2011, the bank considered moving its staff to 800,000 square feet at 3 World Trade Center, a skyscraper under construction in lower Manhattan. Instead it made a deal with Connecticut’s government to keep at least 2,000 jobs in the state, in return for a $20 million loan.

Megan Stinson, a UBS spokeswoman, said she couldn’t comment on the company’s plans for its Stamford offices.

The Stamford Advocate newspaper reported two days ago that Cushman & Wakefield was retained to market the main building, at 677 Washington Blvd.

“We are examining alternative strategies in the event UBS were to move,” Hruska said in a telephone interview.

Scaling Back

UBS in 2012 said it planned to scale down by exiting most of debt-trading businesses to focus on money-managing. It is among several large investment banks that have reduced staff and office occupancy following the 2008 financial crisis.

Last year, the bank vacated most of 299 Park Ave., which had been known informally as the UBS Building, and moved employees into 1285 Avenue of the Americas. Capital One Financial Corp., the bank best known for its widely advertised credit cards, took most of the space that UBS left behind at the Park Avenue building.

The Fairfield County, Connecticut, office market, which includes Stamford and nearby Greenwich, has had vacancies of more than 20 percent since mid-2009, according to Cushman & Wakefield data. While demand for space has improved recently, “a handful of notable spaces are slated to come online, keeping vacancy around its current level,” analysts for the brokerage wrote in a third-quarter report on the market.

Anup Pankhania had to cut the offer price for apartments he’s developing in London’s Bloomsbury district by as much as 500,000 pounds ($805,000) because of a luxury-home tax that doesn’t exist yet.

The discounts are just one example of price increases for the best London homes stalling after more than five years of gains as investors wait to see if the U.K.’s Labour Party will take power next year and impose a promised annual “mansion tax” on properties valued at 2 million pounds or more. Owners of second homes who are based abroad would pay more than those who possess a single U.K. property and live in it.

“There’s too much uncertainty and that rings in the ears of all the buyers,” Pankhania, managing director of developer Jaspar Group of Companies, said in an interview. “Foreign investors get worried and that’s a direct effect of all these politics to do with this mansion tax.”

Prices of the city’s most expensive homes gained at the slowest pace in more than three years in the third quarter, according to London-based broker Marsh & Parsons Ltd. A new tax will add to concerns among overseas buyers who are already contending with a rising British pound as well as a series of levies imposed by Prime Minister David Cameron’s coalition government.

Investors’ Choice

The eight apartments in Jaspar’s Bloomsbury project were valued at an average of about 2 million pounds before the price cuts, Pankhania said. The central London boroughs of Westminster and Kensington and Chelsea contain 46 percent of homes valued at 2 million pounds or more in all of England and Wales, broker Knight Frank LLP estimates.

“Every investor has a choice and they don’t need to choose London,” Nick Candy, the property developer who helped conceive the One Hyde Park apartment project, said at a conference this month. The luxury-home market “may have a slowdown toward the back end of this year, and maybe even a pause next year, before we know who’s going to be in power.”

One Hyde Park was completed in 2011 in the Knightsbridge neighborhood and it has secured some of the highest prices ever paid for apartments in the capital including one that was valued at as much as 175 million pounds when it sold in April.

Central Districts

High-value London homes, which rose even when average prices were still dropping across the U.K., now trail the rest of the capital’s residential market. The average price in the 13 neighborhoods that Knight Frank defines as prime central London rose 7.7 percent in the 12 months through August. Houses and apartments in the U.K. capital climbed by 19.6 percent on average in the same period, according to the Office for National Statistics.

A mansion tax “threatens to douse the growth at the top tiers of the market,” Marsh & Parsons Chief Executive Officer Peter Rollings said in an Oct. 23 statement. “In London especially, thousands of ordinary families would get swept up in its wake.”

Labour, which has backed a mansion tax since last year, stepped up its support this month in an article by Ed Balls, its finance spokesman, in the Evening Standard newspaper.

“Ordinary Londoners should be protected and wealthy foreign investors must finally make a proper tax contribution in this country,” Balls wrote on Oct. 20. Those who own homes worth 10 million pounds or more “should make a much bigger contribution.”

Campaign Issue

The party plans to raise 1.2 billion pounds from the annual tax. The amount would be about 3,000 pounds a year for London-based homeowners with properties valued from 2 million pounds to 3 million pounds, according to Balls. He wasn’t specific about how much more second-home owners would pay. Labour leads the Conservatives among voters by 32 percent to 30 percent, an ICM poll published by the Sunday Telegraph found Oct. 12.

Labour’s plan will raise 120 million pounds a year from homes valued at 2 million pounds to 3 million pounds, according to an estimate by Lucian Cook, head of residential research at broker Savills Plc. That will leave 57,000 homeowners who hold property valued at more than that having to pay the rest of the 1.2 billion-pound target, he said.

“The tax charge for the remaining, more expensive properties will have to be of a different order of scale, which suggests that it will have some impact on the market,” Cook said in an Oct. 20 statement.

The plan to tax all owners of luxury homes contrasts with a proposal in New York for a levy on non-resident holders of apartments valued at more than $5 million. The owners would pay a 0.5 percent surcharge at that level, which would gradually raise to 4 percent for units valued at more than $25 million.

Lower Valuation

If the U.K. mansion tax is introduced, apartments now valued at as much as 2.3 million pounds will probably sell for less than 2 million pounds, said Michael Lister, a lecturer at University of Westminster and a former head of U.K. property lending at Bank of Ireland Plc.

“One would expect developers to find sales at, say, 2.2 million pounds, very difficult,” Lister said in an Oct. 7 e-mail. “This could lead to reductions in sale prices and difficulty in selling.”

Foreign Investment

Values in London’s best districts have risen more than 70 percent since the last trough in 2009 as overseas investors sought a safe haven for their cash and the pound slumped in value. Prices in many parts of the city have now been driven beyond the reach of most Londoners, putting pressure on politicians to rein in values and making developers more dependent on continued foreign investment.

By April, Cameron’s Conservative-led government will have introduced or extended taxes on luxury homes at least seven times, according to broker Savills Plc.

The measures include a 7 percent stamp-duty tax on home purchases of more than 2 million pounds. Chancellor of the Exchequer George Osborne also introduced a 15 percent tax on empty homes owned by companies and he’s introducing a capital gains tax for overseas owners of U.K. homes.

Sales of upscale new homes in central London are declining. The number sold in core locations fell 33 percent in the first half of 2014 from a year earlier, Jones Lang LaSalle Inc. said last month. The broker defines core as Kensington to Canary Wharf on the north side of the Thames, including Bloomsbury, and from Nine Elms to Waterloo in the south.

Outer London

“Serious developers are now looking at peripheral areas of London, which we see as growing more,” Pankhania said in an interview near Berkeley Homes Plc’s 375 Kensington High Street project, where a two-bedroom apartment is priced at 2.1 million pounds. “Central London is sort of a transient place at the moment.”

Berkeley closed down 0.9 percent in London trading today at 2,236 pence, making it the biggest decliner in the 10-stock Bloomberg U.K. Homebuilder Index.

Pankhania said he’s changing focus to districts with prices of 600 to 700 pounds a square foot because that’s a level that local buyers can afford.

That compares with 2,757 pounds a square foot for homes valued at 10 million pounds or more in the city’s best districts and about 1,200 pounds for apartments in Nine Elms, where an SP Setia Bhd. venture is developing the Battersea Power Station. Three-bedroom apartments in the latest phase of the project are offered from 1.9 million pounds and four-bed homes are priced from 3.2 million pounds.

“We’ve put barriers in place to stop investors. We have taxes that change to stop investors,” Candy said at the conference. “We wouldn’t want to look back here in five years time and think ‘everyone’s gone to Dubai or Beijing or New York’.”

Skadden Arps Slate Meagher & Flom LLP signed a letter of intent to move its New York headquarters to a skyscraper to be built at Manhattan West, a development by Brookfield Property Partners LP (BPY-U) on the far west side.

The law firm is the first tenant to sign on at the site, where two office towers are planned. Skadden will occupy space in 1 Manhattan West, a spokeswoman for the company said. That building is described on the project’s website as a 67-story, 2 million-square-foot (186,000-square-meter) skyscraper.

Manhattan West, at about 7 million square feet, is the smaller of two major sites under construction between Penn Station and the Hudson River as the city extends its Midtown business district to the west. Related Cos. is also building Hudson Yards, a $20 billion project that has attracted Time Warner Inc. and Coach Inc. as occupants.

Skadden is moving from 4 Times Square, a tower built by the Durst Organization in the late 1990s, where it occupies about 826,000 square feet under a lease that runs out in 2020, according to data compiled by Bloomberg. Melissa Coley, a Brookfield spokeswoman, declined to comment. A call after regular business hours yesterday to Jordan Barowitz, a spokesman for Durst, wasn’t immediately returned.

The law firm’s departure would leave Durst with no commitments beyond 2020 for the 1.7 million-square-foot tower, whose other tenant, Conde Nast Publications Inc., is days away from starting to move operations to 1 World Trade Center. Durst is an equity partner in that building with the Port Authority of New York and New Jersey.

The Skadden spokeswoman, who citing company policy asked not to be identified, declined to provide details on how much space the firm was taking at 1 Manhattan West. The signing was reported yesterday by the Wall Street Journal.

Both the Manhattan West and Hudson Yards projects require platforms over railroad tracks, which are under construction.